Apple must learn from Nike and get tough on causes of supply chain abuse

Stephen Foley

Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.

US Outlook We're ready for your close up now, Mr Cook. Say cheese. Tim Cook's photo op last week, when the Apple boss visited the firm's Chinese supplier, Foxconn, was timed neatly to coincide with the Fair Labor Association's audit of three Foxconn factories, which concluded health and safety violations were on the way down and the company was jacking up wages so that workers don't need to do such punishingly long overtime shifts that their legs swell up. This is good news.

But one day's photo op doesn't amount to much, given the size of the challenge for Apple in bringing down the human cost of the gadgets we love.

Each subsequent step will be harder – not least for Mr Cook, because it means ripping up the very achievements for which he is so feted in the electronics industry. It also means ripping up the way Apple designs its gadgets. Happily, he need not look far for advice, since Mr Cook is also on the board of directors at Nike, which became a lightning rod for protests about the use of sweatshop labour in the clothing industry in the Nineties.

Like Apple, Nike bore the brunt largely because it was the industry leader and, like Apple, it hated the unfairness of being so targeted.

Like Nike, Apple has set up codes of conduct and audits its suppliers, with limited impact and, like Nike, it has called in the FLA to audit the audits. So far so good – but the most important lesson to be learned from Nike is that this monitoring has its limitations. As Hannah Jones, the Brit in charge of the shoemaker's global corporate responsibility efforts, told me this week: "All monitoring does is reveal the issues. It doesn't solve them. The reasons for excessive overtime, for example, are horribly complicated. You have to do system analysis. You have to do 'root cause' analysis."

To paraphrase a former UK prime minister, Apple needs to get tough on supply chain abuses, and tough on the causes of supply chain abuses.

Ms Jones is touted as a potentially brilliant appointment to advise Mr Cook, and word is that Apple has already considered trying to poach her. I spoke to her because I wanted to know what Nike has learned, to get a sense of what Apple too must learn.

Sticking with the problem of excessive overtime, where the most egregious breaches of Apple's standards were found by the FLA at Foxconn, raising wages will help, but as she told me, there are many other factors at play that make this a daunting challenge. One is the inconsistent application of countries' own labour laws, with local employers taking advantage of the confusion.

This is a problem that can only be tackled by swallowing your bile and allying with the very campaigners who are assailing you.

A company must join forces, too, with rival manufacturers, to press governments to back the levels of standards we in the West expect. Can a company as haughty and as pathologically secretive as Apple reach outside itself to make progress in China?

Ms Jones laughs that she can "geek out" with charts and graphs showing the interplay of factors that trigger gruelling periods of enforced overtime. Even at Foxconn – which is likely to be one of the best run of Apple's suppliers – we know that some employees are worked for 11 days or more without a day off.

Nike's analysis of "root causes" include the unrealistic assumptions about a factory's capacity which can be made by local managers desperate to win business from a global giant.

Another of the most important is the unrealistic demands made of suppliers by global giants – and this is the point where it gets personal for Mr Cook. As Steve Jobs's right hand man at Apple, he was hailed a hero for building a supply chain that danced to Apple's exacting tunes, able to turn a Jobsian brainwave into a mass market gadget in record time and able to scale up to meet the frenzied demand that would quickly follow.

What Ms Jones calls "the troughs and valleys and peaks of demand" which require suppliers sometimes to pile overtime on top of overtime, these can often be traced back to the way a customer like Apple works.

Caring about the workers in the supply chain begins with a more supplier-respectful planning process at Nike, she says.

There's more. Nike has just launched a new kind of running shoe it calls the Flyknit, which is knitted together using a single thread instead of being made by cutting and combining numerous component parts.

That reduces waste and – most importantly – eliminates the dangerous glues that cause health problems for workers. Eliminate dangerous chemicals and you can eliminate a whole apparatus of monitoring factories' compliance with protective clothing rules and ventilation and the like.

Can Apple, with its relentless focus on what western gadget-lovers want, also start to think of its supply chain workers as early as at the design stage?

The relentless focus on Foxconn has pushed that company to make big improvements; it will be harder across the hundreds of other, smaller firms in China and across the emerging markets which supply the parts and labour for our iPads, iPods and iPhones. Even after more than a decade, scandals still erupt in Nike's supply chain. Last year, Indonesian workers supplying its Converse subsidiary said that supervisors regularly threw shoes at them, and slapped them in the face, and called them pigs and dogs. The shoemaker's latest initiative has been to make human rights, labour conditions, safety and sustainability part of the "score card" it uses – along with the usual metrics of price, efficiency and capacity – when first choosing suppliers and negotiating contracts. In other words, it is all part of the opening conversation, not something you impose late and monitor later.

Nike founder Phil Knight, in the 1998 speech to the National Press Club that signalled the end of his denial phase, called the reputational damage being done to the company "the cloud over Nike's head". Mr Cook has never been in denial about the importance of these issues for Apple's brand and for the morale of its own employees – how could he, as a Nike board member? – but the cloud remains.

Lifting it involves moving beyond monitoring, to something much more revolutionary. It is about making sure that respect for the men and women in the supply chain is "designed in" to the gadgets Apple makes.